When a PLCC (15) customer makes a purchase from Taxpayer or
one of its affiliated entities, the relevant Finance Company
forwards to Taxpayer the amount of the purchase, including the
amount of the transaction privilege tax that is built into the sales
price, less a service fee. From this amount, Taxpayer pays the
applicable transaction [sales] privilege tax to the State of Arizona.
Taxpayer deducts the service fee on its federal income tax form as
"other deductions," not as "bad debts." Meanwhile, the Finance
Companies deduct losses from unpaid accounts as bad debts on their
federal income tax returns. (16)